Final answer:
A suspense account is used in bookkeeping as part of the error correction process to temporarily hold transactions with unidentified or unresolved discrepancies. It is used to investigate and resolve errors before properly recording the transactions in the correct accounts.
Step-by-step explanation:
A suspense account is used in bookkeeping as part of the error correction process when there are unidentified or unresolved discrepancies in the accounts. It acts as a temporary placeholder for transactions that cannot be immediately recorded or allocated to the correct accounts. For example, if a payment is received but the purpose is unclear, it can be recorded in the suspense account until further information is obtained.
The suspense account is then used to correct errors by investigating and resolving the discrepancies. Once the correct information is obtained, the transactions in the suspense account can be properly recorded in the appropriate accounts. The suspense account should ideally be cleared on a regular basis to ensure accurate financial reporting.
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